Healthcare spending paradox: National spending down, consumer costs on the rise

Despite a nationwide slowdown on healthcare spending, a new study by healthcare economics consulting firm Dobson DaVanzo shows that consumers now spend more on healthcare through higher out-of-pocket expenses and premium costs.

The Federation of American Hospitals commissioned the report, which examined the national spending slowdown occurring in tandem with a structural change in health insurance benefit design. The firm examined first quarter findings from the Bureau of Economic Analysis, which reveals that national consumer healthcare spending dropped by 1.4 percent--the largest decrease in national healthcare spending in 30 years.

Analysts believe that structural changes across the healthcare industry drive this trend. "Hospitals continue to work diligently to increase the value of patient care, and are encouraged by the enduring spending slowdown," said Charles N. Kahn III, president and CEO of the Federation of American Hospitals, in a statement announcing the report findings.  "This slowdown has resulted in massive savings to Medicare and is accompanied by real moderation in healthcare pricing growth."

But as healthcare insurers shift more risk to consumers--at the same time the country experiences modest wage growth--the average American now faces higher out-of-pocket and premium costs. As the risk increases in greater proportion to wages, the report finds that consumers pay more for personal healthcare coverage.

However, analysts say it's important to encourage the nationwide slowdown in healthcare spending because in the end it may benefit consumers through slower premium growth and slower healthcare price growth.

"It is prudent for policymakers to allow the healthcare marketplace to continue adapting, innovating, and implementing the structural changes already underway; as the cost-curve continues to bend, both payers and consumers will ultimately benefit both from reduced spending on healthcare and from a vastly improved healthcare system," researchers concluded in an executive summary.

To learn more:
- read the report (.pdf)
- here's the executive summary (.pdf)

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